The royal commission heard that in a report to the board in July, Mr Elia had estimated that following the government’s reforms around low-balance accounts and insurance in super, approximately 670,739 Hostplus members would potentially have their insurance cover cancelled.

These members either had a balance below $6,000, members under the age of 25 years and members whose accounts have not received a contribution in 13 months.

The report by Mr Elia estimated that, collectively, this particular cohort pays default insurance premiums of $96.8 million per annum, representing 43 per cent of the $225 million in total insurance premiums paid to its group life insurer, MetLife.

It stated that Hostplus administration reserve accrues a tax benefit on insurance premiums paid, and that the tax benefit received by the fund is equal to 15 per cent of the insurance premium paid.

The proposed policy, therefore, had the effect of reducing the total tax benefit received by 14.5 million per annum.

The report also stated that the loss of these tax benefits was forecast to reduce the Hostplus administration reserve of approximately $172 million down to approximately $45 million.

“What you've set out here shows that Hostplus is reliant on these cohorts with the low balances, who are young and are not likely to need the cover, they are essentially propping up the fund with their insurance premiums,” said counsel assisting Eloise Dias to Mr Elia.

Mr Elia disagreed with this suggestion and stated that “philosophically, the fund didn’t agree that certain members should be excluded”.

“It's generally where people are moving into the work force that people actually do need insurance so this is not a position that Hostplus as the trustee would agree with,” he told the commission.

While Mr Elia denied that that the fund was reliant on the tax deductions received for insurance premiums paid by members, he did concede that the fund does receive tax deductions for these insurance premiums at a fund level.

Ms Dias questioned why Hostplus keeps the tax benefit on the insurance premiums paid.

“The fund was set up 30 years ago and was before my time. That's been the underlying business rules of the fund, and my understanding is that it has a lot to do with the fact that it's a group life policy, it's not an individual policy, which is a function of the demographics of the entire fund and risk profiling of the fund,” said Mr Elia.

“Therefore, it's the entire membership to some degree that contributes to the overall premium structure of the fund or premium design of the fund and, therefore, of the benefits of the premium's deductibility by all of the membership. Hostplus is not uncommon in terms of having that deductibility at a fund level.”